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Blockbuster: 'rental is our basic business.' (Blockbuster Video plans to rent and sell software)

Further evidence of The Great Digital Convergence: Blockbuster Video has decided it likes the software business. In fact, the world's largest video rental chain likes software so much that it's about to plug software rentals and sales into most of its outlets--4,000 stores and growing. (The largest consumer software specialty chain, created by the merger of Babbage's and Software Etc., currently has 700 outlets.)

Of course, Blockbuster isn't the first consumer retailer to announce grandiose--and ultimately unsuccessful--plans to cash in on software. What's interesting this time is that Blockbuster seems to have done its homework. Jack Ferry, Blockbuster's director of new media, says the chain made its decision only after a large scale pilot test in 57 Bay Area video and music outlets. Blockbuster set up rental kiosks in every store, staffed them with in-store demonstrators, and then grilled customers about their software preferences and demographics.

What Blockbuster discovered, says Ferry, is that customers were most turned on by the chance to preview multimedia titles--something no other retail chain offers. Blockbuster charged $4 for a three-day rental, and let customers apply the rental fee to the price of titles they decided to buy. "Rental is our basic business," Ferry adds, "so this is the kind of service our customers expect from Blockbuster."

Ferry says the rental conversion rate was good enough that Blockbuster is even considering adding "whole computer stores" and electronic downloading to some of its outlets. And he expects higher sales levels once Blockbuster gets more aggressive about pricing. "Below a certain income level, we found our customers were going to discount software outlets to make purchases. We want to give those people second thoughts about driving across town."

The conversion rate also seems to have won over publishers who at first disliked Blockbuster's rental model. "Resistance has subsided," says Ferry. "Everybody wants to play now." Blockbuster initially stocked titles from 37 consumer software and videogame firms; Ferry says he's now looking for "just the right mix" of titles that will build more rental traffic. "Ten to 15 titles drive the business, and choosing them is a challenge."

Jack Ferry, director of new media, Blockbuster Video, One Blockbuster Plaza, Ft. Lauderdale, Fla. 33301; 305/832-3213.
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Copyright 1994, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Soft-Letter
Date:Sep 26, 1994
Words:368
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